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Institutional investors, who drove the distressed sales market over the past few years, dropped off earlier this year, faced with bidding wars in some of the previously hot markets. Now they appear to have revived interest.
Their purchases represented 7.7 percent of all home sales in November, up from 6.3 percent a year ago. This may be because price gains are slowing down, and more inventory is coming on the market.
"We have seen an uptick in REO offerings, which is a little surprising for this time of the year," said Rick Sharga, executive vice president at Auction.com.
Sharga said his company, which auctions off properties online, got 3,000 REOs last week that had never been marketed before. "We are seeing more properties sold at trustee sales, and we are seeing more properties that are coming from servicers priced to sell at trustee sales."
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Previously, mortgage servicers had put foreclosed properties up for sale at the full value of the loan, but those usually went back to the bank, as investors sought a larger discount. Ironically, as prices are rising, servicers are discounting the homes more.
In turn, the share of all-cash sales is rising again. While the Realtors put it at 32 percent of all sales, RealtyTrac, which may get more data on distressed sales, puts the share at 42 percent, the highest level since it began tracking all-cash purchases in January 2011.
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In the meantime, Fannie Mae just announced it is giving non-investors more time to look at its bank-owned properties before letting investors compete. Its "First Look" program used to give owner-occupant buyers 15 days to make an offer before investors could bid. That has been extended to 20, possibly reflecting the extended time it is now taking consumers to secure financing. Investors largely use cash.
"The goal has always been to sell to owner-occupants whenever possible," said Fannie Mae spokesman Andrew Wilson.